Aramark

Good morning and welcome to Aramark's first quarter fiscal 2026 earnings results conference call. My name is Kevin and I'll be your operator for today's call. At this time, I'd like to inform you this conference is being recorded for rebroadcast and that all participants are on a listen-only mode. We will open the conference call for questions at the conclusion of the company's remarks. I will now turn the call over to Felice Cassell, Senior Vice President, Investor Relations and Corporate Development. Ms. Cassell, please proceed.

Thank you and welcome to Aramark's earnings conference call and webcast. This morning, we will be hearing from our CEO, John Zilmer, as well as our CFO, Jim Tarangelo. As always, there are accompanying slides for this call that can be viewed through the webcast and are also available on the IR website for easy access. Our notice regarding forward-looking statements is included in our press release. During this call, we will be making comments that are forward-looking. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the risk factors, MD&A, and other sections of our annual report on Form 10-K and SEC filings. We will be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP can be found in our press release and IR website. With that, I will now turn the call over to John.

Good morning, everyone, and welcome to our fiscal first quarter earnings call. Thank you for joining us. We're very pleased with the strong results delivered in the quarter, even when considering the calendar shift referenced in the earnings release. The company has significant business momentum, which Jim and I will share in greater detail. We believe we're well positioned to record record-breaking financial performance driven by our growth mindset, operational discipline, and unwavering commitment to service. We're seeing multiple positive growth trends throughout the organization, including extraordinary client retention in both FSS U.S. and international, levels we've never seen before achieved at this point in the fiscal calendar, combined with significant new client wins already awarded to us early in the fiscal year. particularly in healthcare, education, and corrections within the U.S., and in sports, mining, and energy within the international, with substantial new business opportunities immediately upon us, giving us great confidence in reaching our net new target of 4% to 5% in fiscal 26. And lastly, adding new purchasing spend in our global supply chain GPO network within hospitality areas such as theme parks, hotels, and now cruise lines, in addition to benefiting from increased volume and scale occurring more broadly at the company. In the first quarter, organic revenue for Aramark grew 5% to $4.8 billion and would have increased approximately 8% if not for the calendar shift. Growth resulted from both strong base business and net new business. We expect performance acceleration to occur as we successfully onboard a record level of new account wins, combined with maintaining the unprecedented retention levels I just mentioned. Notably, this doesn't factor in sizable new client wins, which would drive our business momentum even further, and we're expecting those to begin this fiscal year. Moving to the business segments. FSS U.S. organic revenue increased to $3.4 billion, or 2%. it's worth highlighting that the segment would have grown approximately 5% if not for the calendar shift, which primarily affected education. Of course, this growth will simply be recaptured in the second quarter as part of our results, ultimately having no impact on the full year. Top line revenue growth drivers in the quarter were led by workplace experience, which delivered a 17th consecutive quarter of double digit growth from launching significant new business wins in addition to strong holiday catering activity. Refreshments mobilized new accounts at an accelerated rate and identifying additional growth opportunities from an integrated enterprise-wide strategy. Healthcare experienced strong base business, specifically from vertical sales success and the expansion of multi-service offerings. Sports and entertainment expanded our college football portfolio by providing a pro-level hospitality experience where alcohol unit sales are now becoming comparable to NFL stadiums. And corrections continue to add statewide systems as our Into Work program is nationally recognized for the ability to provide pathways for education, career development, and rehabilitation. Just last week, we successfully launched operations at Penn Medicine. the largest contract win ever in the US, as you recall. As the fiscal year progresses, we'll continue to roll out services across Penn Medicine's nearly 4,000 bed, seven hospital system, including patient and retail food service, environmental services, patient transportation, and an integrated call center to support operations. I'm extremely excited to announce that our success in demonstrating Aramark's enterprise-wide capabilities and collaboration resulted in our newest healthcare win, RWJBarnabas Health, the largest, most comprehensive academic health system in New Jersey, covering eight counties, serving over five million people. RWJBarnabas Health has 18 primary locations with 5,700 beds. Anticipated to launch this summer, we will support their patient and retail dining, environmental services, and patient transport. This represents one of the largest contracts awarded in healthcare in recent history. Other clients added to the portfolio include the University of Albany, where we began operations this semester to redefine the student dining experience through innovation, inclusivity, and community engagement, as well as a new statewide relationship with the Alabama Department of Corrections to deliver food services, integrating our proprietary AI platforms for menu planning and operational efficiency across 27 facilities. As you can see, we're already off to a great start for the fiscal year in new account wins. We anticipate the U.S. growth trajectory to continue from strong new business, high retention rates, and increased volume growth. Once again, international deliberate outstanding results with revenue reaching $1.5 billion in the first quarter, an increase of over 13% year-over-year on an organic revenue basis, with international revenue results largely unaffected by the calendar shift. International reported a 19th consecutive quarter of double-digit growth, maintained an exceptional client retention level, and every country contributed to revenue growth in the quarter, with the UK, Spain, Germany, and Chile leading the way. New business in the first quarter within International included the Welsh Rugby Union, highlighted on the last earnings call. In just a few days, we'll be serving 74,000 fans of Principality Stadium, the largest stadium in Wales and the fourth largest in the UK. and the location for the upcoming highly attended Six Nations Rugby Championships. We were also awarded copper mining and state-owned giant Codelco and other meaningful mining contracts in Latin America. The international team achieved well over 100 core account wins in the first quarter, providing us with the ability to establish additional business development and operational scale in the countries we serve. Now, for an update on global supply chain, Performance was strong in the quarter as the team is focused on growing and optimizing spend and offering superior products, services, economics, analytical insights, and sourcing solutions for our clients. Inflation continues to actualize in the range we anticipated, with all global regions in line or favorable to our assumptions. We remain highly committed to GPO growth and are actively pursuing meaningful opportunities. Double digit growth propelled well over $20 billion worth of contracted spend as we expand business in international regions, increase penetration in adjacent hospitality areas, and further scale through select strategic acquisitions. AI-driven technology continues to differentiate our supply chain and GPO capabilities, delivering back-end efficiencies and actionable business insights. Tools such as mobile AI chatbots and AI enhanced analytics provide GPO clients real-time visibility into their business. In our own internal supply chain operations, AI systems are accelerating back-end efficiency and productivity gains. Before handing over the call to Jim, I want to reiterate our confidence in realizing the numerous growth opportunities ahead for the business this fiscal year, driven by the strategic and operational actions underway at the company. Our success comes from the teams throughout the organization and around the globe who show up every day with purpose, serving with integrity, solving problems with ingenuity, and delivering consistent excellence.